Would-be casino operators unveil ideas for Rocky Gap

Barbara Haddock Taylor / The Baltimore Sun

Members of the Maryland Casino Commission tour Rocky Gap Resort, where they heard from two competing bidders that would like to add a slots parlor to the resort. Here, from left: Enrique Melendez, managing partner of Paragon Project Resources; Commission members Donald Fry, center, and Linda Read, right, walk along the road in front of the hotel. Melendez was leading a tour on behalf of Evitts Resort LLC, one of the slots bidders.

Members of the Maryland Casino Commission tour Rocky Gap Resort, where they heard from two competing bidders that would like to add a slots parlor to the resort. Here, from left: Enrique Melendez, managing partner of Paragon Project Resources; Commission members Donald Fry, center, and Linda Read, right, walk along the road in front of the hotel. Melendez was leading a tour on behalf of Evitts Resort LLC, one of the slots bidders. (Barbara Haddock Taylor / The Baltimore Sun)

Annie Linskey, The Baltimore Sun

— One group that wants to open a casino at the Rocky Gap Lodge and Resort envisions amenities including five restaurants, a spa, a golf and tennis academy and an automobile museum. The other promises to invest $62 million to build a 50,000-square-foot gambling palace and stresses that its team has the experience to get the job done.

Representatives of the two competing bidders descended on the long-struggling Western Maryland resort Tuesday afternoon and presented plans to transform a state-backed development failure into a revenue-generating casino. Maryland's six-member Video Lottery Location Commission will choose the winner, possibly by the end of the year.

One thing is clear: Everyone involved, from the governor to the receptionist at the hotel's front desk, really wants one of these ideas to pan out. The resort could be shuttered otherwise, because it has not been able to pay down the debt incurred to build it and, in recent years, needed millions more in state funding just to keep the doors open.

"We've been working so hard to get to the point where we have some viable options," said state Del. Wendell R. Beitzel, who represents the area.

Finding a bidder to open a casino here hasn't been easy. The project was offered twice, with no qualified applicants stepping up. The governor and General Assembly went back to the drawing board twice to sweeten the deal. Finally, in a third round of bidding, two groups offered workable plans.

The first group, Landow Partners, led by former Maryland Democratic Party chairman Nathan Landow, offered a dazzling display of attractions and a design intended to steer every single visitor directly to the casino. Their gambling floor would open with 500 slot machines.

"It isn't going to be just a slots venue," said Landow after describing his proposal to the commission. "It is going to be a destination resort." Landow is the only principal in the group, though he brought with him gambling consultants and an architect.

Commissioners showed concern about one key element of the design: The casino is difficult to avoid. "Are you going to discourage families from using this place?" asked Rona Kramer, a member of the slots commission who is a former Democratic state senator from Montgomery County. She noted that state law bars children from entering casinos and observed that all of the proposed entrances would lead straight to the gambling floor.

Landow was unfazed, saying that the design could be changed.

Kramer and others also expressed concern that the resort would have to close for a time during construction, jeopardizing the employment of staff.

The second group, Evitts Resort LLC, a joint venture of three businesses that takes its name from a nearby mountain ridge, offered to open with 850 slot machines. Its plan featured fewer additional businesses.

But the group had more to say about how it would confront the challenge of geographical isolation that has bedeviled the current hotel and compete with new casinos in West Virginia and Pennsylvania.

"We don't have to beat [surrounding casinos]; we just have to munch on them," said Lyle Berman, the CEO of Lakes Entertainment, an Evitts partner. "We have to have a fancy enough casino with enough stature and pizazz that people will want to drive here."

Berman's company, which is traded publicly, has managed about a dozen casinos around the country, many in rural settings like Allegany County. He noted that the group hired a marketing team and is "comfortable" that gamblers from cities can be enticed to make the trek.

Also involved is Paragon Project Resources, a real estate development company that has built projects, mostly at airports, in twelve states. The local partner is Enrique Melendez, a self-described minority businessman who is a member of the Anne Arundel County Board of Education.

Eventually they want to build a new 300-room lakefront hotel to supplement the existing 215-room lodge. They'd also bring in two new restaurants and a 25,000-square-foot theater.

Both bidders say they would eventually install 1,000 slot machines at the casino and would reserve some space for poker and blackjack if Maryland's General Assembly changes the law to allow table games.

Rocky Gap is the only one of Maryland's five planned casino locations to have received more than one qualified bid, which means the slots commission will have to pick a winner. Rocky Gap's private debt holders also will have a say because the bidder will have to buy the existing lodge from them.

Questions from the commissioners yesterday sounded a similar theme: How will you make this far-flung location work? The skepticism is rooted in Rocky Gap's difficult history.

It was envisioned as "Maryland's answer to Greenbrier," the famous resort in West Virginia, when it opened in 1997. Each bathroom in the 215-room hotel features Italian marble. The foyer includes floor-to-ceiling glass windows offering a stunning view of the lake. The project was hailed as "a major step forward in creating a diversified and revitalized Western Maryland economy" by then-House Speaker Casper R. Taylor Jr. when Maryland's Board of Public Works approved $54 million to construct it. Taylor is now a lobbyist for bondholders of the debt-laden facility.

The project stumbled from the start, never generating enough money to pay off the private debt, much less the state and local loans. In the last couple of years, it hasn't been able to cover day-to-day operating costs, prompting the state to lend additional money to the facility.

Bondholders have whispered in recent years about foreclosing. State lawmakers decided to offload the property on a casino operator and suggested it as one of five locations for slot-machine gambling. Maryland voters approved the site and four others in 2008.

But when the casinos were put out to bid in 2009, only one group showed interest in Rocky Gap. The lone proposal was quickly dismissed because application fees were not paid.

To sweeten the deal for Rocky Gap, in 2010 the General Assembly clipped 2.5 percentage points off the 67 percent tax rate on gambling revenues. Still no bidders came forward.

Lack of interest, plus continued operating losses, led to more drastic measures. Last spring the General Assembly slashed the tax rate to 50 percent for the next 10 years, erased the required $3 million application fee on the first 500 machines and waived a requirement that the developer construct a separate building for the casino.

The result: Three groups bid on the project, though one was quickly disqualified for failing to properly complete the application.

One of the bidders Tuesday still had gripes with tax rate. Asked about the biggest challenge facing the project, Berman, of Evitts Resort LLC, cited the state's take from the gambling revenues.

"It does put constraints on what you can do," Berman said, pointing out that Maryland's tax is far higher than those other states.